Surgery Centers Worried About Tax Proposal

HARTFORD (AP) - Operators of surgery centers across Connecticut are working to persuade state lawmakers to scrap a new tax in the Democratic budget they claim will prompt some facilities to close.

The centers provide colonoscopies, cataract removal and other outpatient procedures. The Connecticut Association of Ambulatory Surgery Centers says about 15 of the group's 61 member centers will be forced to close if the 6 percent "provider tax" included in the two-year, $40.3 billion budget becomes law.

Many centers operate on thin margins, said association President Ken Rosenquest.

"This tax winds up taking money out of their pockets and many are going to have to ... perhaps cut back on the service they provide or the services they're contemplating growing into," he said.

The first U.S. ambulatory surgery center opened in Phoenix, Arizona in 1970 by two doctors who wanted to offer patients an alternative to hospital care for surgical services. Today, there are more than 5,300 such facilities in the U.S., performing about 23 million surgeries annually, according to the Virginia-based Ambulatory Surgery Center Association. In Connecticut, about one or two have opened annually since about 2005, the state association estimates.

Connecticut surgery centers do not pay a provider tax. Rather, Rosenquest said they operate like other small businesses, paying sales taxes on supplies and local property taxes on items such as X-ray machines.

Dr. Martin Pressman, a podiatrist at the Connecticut Foot Surgery Center in Milford, said the planned tax would be applied before any expenses are taken out.

"Its net impact on our bottom line could be 25 to 30 percent," he wrote in an email. "This threatens our ability to stay in business and would likely force patients into more expensive hospital surgery settings."

While the national association does not track taxes on surgery centers, a spokeswoman said few states impose them. Rhode Island lawmakers have passed a budget that removes a 2 percent surcharge on net patient revenue at outpatient facilities and imaging services. Florida recently repealed a similar 1 percent tax.

Rosenquest said Connecticut's tax proposal, tucked into the tax package that cleared the General Assembly's Finance Revenue and Bonding Committee during the regular legislative session, came as a surprise to surgery centers. They're now working to scrap or revamp the language in a budget-related bill the General Assembly is expected to take up in special session, possibly on June 29 and 30.

The new tax is estimated to generate $15 million in the first year of the budget and $20 million in the second.

The legislature is under pressure to scale back many of the $1.5 billion in tax increases in the two-year budget, especially on businesses. Democratic Gov. Dannel P. Malloy recently offered up some possible changes, but did not mention the tax on surgery centers.

When asked about the surgery centers' concerns, House Majority Leader Joe Aresimowicz, D-Berlin, said it's been great for lawmakers to receive public input on the budget.

"Where there are areas to where we can make little tweaks, and make it a little more palatable for some, we'll try to do that," he said. "I think that's what we typically do."